Unexplained cash deposits: contemporaneous books and audited statements can rebut additions, leading to deletion of the assessment adjustment.

Whether additions under unexplained cash provisions could be sustained where assessee produced contemporaneous books, audited financial statements and GST reporting was the central issue; ITAT treated the taxpayer's production of cash book, bank book, sales ledgers with party details and audited accounts as discharging the onus to explain deposits and found that alleged discrepancies, average-withdrawal comparisons and questioning of prudence did not demonstrate falsity or warrant rejection of books. Outcome: addition of the unexplained cash amount was deleted and the issue decided for the assessee.

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Issues: (i) Whether the addition of Rs. 32,90,000 made to the assessee's income under the unexplained cash provisions, on account of cash deposits during the demonetisation period, was justified.

Analysis: The question examined was whether the assessee discharged the onus of explaining the source of cash deposits of Rs. 32,90,000 during the demonetisation period. The assessee had produced cash book, bank book, sales ledgers with party details, audited financial statements and evidence of reporting sales to the GST authority. No entries in the books were found to be false and the books of account were not rejected. The authorities below based rejection on comparisons of total withdrawals with average expenditures, lack of party details, alleged pre-incorporation transactions and discrepancies in opening cash balances; these bases were evaluated against the documents produced and the absence of any confrontation or opportunity to reconcile figures during assessment. Questioning the prudence of withdrawals without demonstrating falsity of entries was treated as insufficient to displace the explanation supported by contemporaneous books and audited statements.

Conclusion: The addition of Rs. 32,90,000 under the unexplained cash provisions is not tenable and is deleted; issue decided in favour of the assessee.

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